Friday, June 22, 2007

Today the CXO Advisory Blog is out with an assessment of the predictive value of put to call ratios for individual stocks.Drawing heavily on Jun Pan and Allen Poteshman’s 2006 “The Information in Option Volume for Future Stock Prices” from The Review of Financial Studies, the folks at CXO conclude that put to call ratios have “significant predictive power for individual stocks.”Unfortunately, there is a qualifier that “this effect relates predominantly to data that is not publicly available.” [underline in original]

While I support these conclusions, I would not be so quick to be deterred by the qualifier.In “How to Find the Earnings Spiker Before the Announcement” I highlighted the put to call ratio for individual stocks as a key component of the screening formula and provided a link to the SchaeffersResearch.com page where you can find the appropriate charts and data.This data is both public and free; you can’t beat that.

There is also a subscription service from the ISE called ISEE Select that the exchange describes as a “trading tool that uses proprietary call/put trade data from the ISE to identify bullish and bearish sentiment for individual securities.”The ISE goes on to explain that ISEE Select “allows subscribers to retrieve intraday and historical call/put values for securities whose options are traded on ISE.”For the record, I intend to give ISEE Select a try shortly and will be glad to provide my thoughts about the value of this service in this space.In the interim, interested parties may want to check out ISEE Select services and pricing, as well as their FAQs.

Purpose of this Blog

The intent of this blog is to educate, inform and entertain readers, while also serving as an archived learning laboratory of sorts as I try to sharpen my thinking in areas such as volatility, market sentiment, and technical analysis. I also enjoy charging off on tangents and hope that readers may find some illumination or at least amusement in these forays.

Reviews of VIX and More

About Me

Chief Investment Officer at Luby Asset Management LLC in Tiburon, California. Previously worked as a full-time trader/investor and also a business strategy consultant. Education includes a BA from Stanford and an MBA from Carnegie Mellon.
Useless trivia: I once broke the world pogo stick jumping record without knowing it.